General Motors on Death Watch

GM Recovery Swaps Signal 73% Bond Losses on `Highway to Hell' Bloomberg
General Motors Corp.bondholders may lose as much as 73 percent in the event of a default by the world's biggest automaker, based on the price of contracts used to fix a recovery value for the securities.

The recovery swap rate on GM dropped to 26.5 percent, from 39.5 percent at the end of June, meaning investors expect to get only 26.5 cents on the dollar in an insolvency, CMA Datavision pricing models show. Investors are pricing in a lower recovery rate than the average of 40 percent in bankruptcies as capital is eroded by $69.8 billion of losses since 2004.

"GM is on the highway to hell, there is no signal there is a way out for them," said Jochen Felsenheimer, the Munich-based head of credit strategy at UniCredit SpA, Italy's biggest bank. "Recovery on GM might be significantly below 40 percent."

What If the U.S. Auto Makers Don’t Survive? Wall Street Journal
The Big Three could soon become the Big Two. Is even that too many?

The question of whether all three Detroit auto makers will survive is out there, based largely on the inability of the debt-laden companies to get access to funding. General Motors is desperate enough for cash to consider merging with Chrysler. On Oct. 6, Fitch downgraded Ford Motor and Ford Motor Credit to CCC, the lowest junk rating. Deutsche Bank’s Rod Lache wrote Sunday that the auto industry may survive because of federal bailouts and restructuring. But, he wrote, “based on our belief that at least two of the U.S. Big Three automakers could reach minimum cash levels within the next 12 months, we continue to assess the risks to our universe.”

GM-Chrysler: Obama, McCain advisers take no sides Reuters
An economic adviser to Republican candidate John McCain said any merger should be evaluated on the basis of its competitive implications.

Asked whether Sen. Obama would support government financing for GM to back the merger, his economic adviser, Austan Goolsbee, told Reuters that Obama supported the existing plan to guarantee $25 billion of low-interest loans for the auto industry but had not taken a position on a GM-Chrysler merger.